Search

In order to assess the viability of wind energy projects in China, this paper takes a real options approach by accounting for flexibility over deployment of the technology in response to a stochastic non-renewable energy cost. The difference between the latter and the R&D-enhanced cost of renewable energy operation may be thought of as a benefit from using wind. On the other hand, the Chinese government provides feed-in tariffs to encourage further adoption of wind, which should be included as a cost. This work, thus, shows that there is substantial options value to China's wind energy program, which is bolstered if the cost of carbon dioxide emissions is internalized. Moreover, by varying the rate of feed-in tariffs, the model may be used to show plausible ranges for the feed-in tariffs, which could be a useful policy insight. Furthermore, the study hypothesizes that with the likelihood of renewable energy to replace non-renewable energy, wind power in China can potentially reduce CO 2 emissions by approximately 6.4% by 2020 comparing to the 2005 level and highlights the significant role of wind power in China's emission targets and energy security. This is a relevant paper, especially given the importance of a sustainable energy transition for China. More generally, using the real options approach from a policy perspective could provide insights about the viability of renewable energy programs and robustness of feed-in tariffs rates. [ABSTRACT FROM AUTHOR]

In recent years, China has successively issued relevant policies to support the development of distributed renewable energy sources such as dispersed wind power (DWP) and distributed photovoltaic (DPV). The capacity of DPV grows fast, but the progress of DWP deployment is limited. In this paper, the improved levelized cost of electricity (LCOE) model and the internal rate of return (IRR) are employed to evaluate the economics of DWP and DPV for case regions. We find that, under current market regime, the IRR of DWP in eastern and central regions is 8.81%–10.34% for the grid side, and which of DPV is 9.08%–12.8% for the user side. When the power market is restructured, the IRR of DWP for industrial and commercial user side increases to 12.73%–14.86%, higher than that the return of DPV. Policy implications on grid-connection, land expropriation, and financial support, planning and approval procedure are proposed to promote the development of DWP. Overall, this paper covers the research gap on the development of DWP in China with a technical/institutional economics perspective and a comparison with DPV. Furthermore, our efforts make a significant contribution to DWP policy by identifying the institutional factors that hinder the development of DWP. • Explore the technical & institutional factors around DWP deployment in China. • DWP and DPV gain comparable economic returns under current planning regime. • DWP can have better economic returns than DPV with electricity market reform. • Identify institutional factors that hinder DWP and propose policy implications. [ABSTRACT FROM AUTHOR]